Senate votes for compromise on use of noncompete pacts

Nashoba Publishing

Posted:
07/02/2014 10:02:39 AM EDT

By Matt Murphy and Colleen Quinn

STATE HOUSE NEWS SERVICE

STATE HOUSE -- On the same day that a legislative committee heard testimony about restricting the use of non-compete employment agreements, the Senate arrived at a compromise during its debate on a jobs bill that would limit the duration of such agreements to six months and prohibit their use for hourly employees.

The Senate voted 32-7 in favor of the compromise offered by Sen. William Brownsberger after Gov. Deval Patrick earlier this spring proposed banning their use altogether.

Brownsberger, a Belmont Democrat, said it was a difficult issue to address because the impact varies from industry to industry. The amendment does not ban non-compete agreements, he said, but changes are necessary because there is wide-spread "abuse" of the agreements that are used to prevent employees from going to work for a competitor once they leave their jobs.

The House opted against making changes to the use of non-compete agreement in contracts when it debated its version of the economic development bill, meaning the issue could get settled during conference committee negotiations later this month.

Under current law, employers can add a non-compete clause to employment contracts.

Economic Development Secretary Greg Bialecki, earlier in the day at the hearing, said the potential compromise being put forward by Brownsberger and Rep.

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Lori Ehrlich was "thoughtful," and said the administration was willing to listen to ideas short of all-out ban as long as the reforms were "substantial."

"Today's hearing demonstrated that non-competes affect all sectors of the economy and stifle job growth and innovation across the Commonwealth. We thank the Senate for taking action on this critical issue," said Matt Sheaff, a spokesman for Bialecki, after the Senate vote.

Business groups have defended the contract clauses as important tools to protect trade secrets and sensitive information about how companies operate, but Sen. Gale Candaras said lawmakers have heard "unconscionable stories of people who have been harmed by these agreements."

"People are begging us for relief," Candaras said. The Senate economic development bill also calls for the adoption of the Uniform Trade Secrets Act to further protect proprietary corporate information.

Candaras said she knows someone who now works at the State House that was laid off and forced to go on unemployment because she has signed a non-compete clause and could find another job in her field. Under the Senate amendment, it would be prohibited for employers to make hourly workers sign non-compete agreements. Other senators said they heard numerous stories of hairdressers, camp counselors and pizza delivery drivers forced to sign non-compete agreements.

Sen. Michael Rodrigues, a Westport Democrat, said he disagreed with one aspect of the compromise that prevented hourly workers from being subjected to non-compete agreements. Rodrigues argued that in the building trades employers often pay for training and licensing for their workers, and need protection that non-compete agreements offer.

The amendment also provides some clarity on when the agreements can be executed, dictating they be presented to a potential employee in a timely way, so the worker knows what they are getting involved with before starting a job, Brownsberger said.

The agreement must be presented at least five business days before the employee starts work, or when any formal offer of employment is first made to the employee, according to the amendment.

If the agreement is entered into after the person is already employed, but not in connection with separation from employment, "it must be supported by fair and reasonable consideration in addition to the continuation of employment, and notice of the agreement must be provided at least ten business days before the agreement is to be effective," the amendment states.

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